How Is GameStop Likely To Have Fared In Q1?

GME: GameStop logo

GameStop Inc (NYSE:GME) is expected to publish its Q1 2019 results on June 4. This note details Trefis’ forecasts for GameStop, as well as some of the key trends we will be watching when the company reports earnings. You can view our interactive dashboard analysis ~ How Is GameStop Likely To Have Fared In Q1 2019? for more details on the key drivers of the company’s expected performance in Q4. In addition, you can see more of our data for consumer discretionary companies here.

What are GameStop’s key sources of revenue?

  • GameStop reports its revenues under four segments:
  • New Video Game Hardware, which refers to sales of new video gaming consoles and hand held consoles. The segment accounted for 21% of the company’s total sales in 2018.
  • New Video Game Software, which refers to the sales of new video games for consoles. These games are from third-party publishers, such as Electronic Arts, Take-Two Interactive, Ubisoft, and Activision Blizzard, among others. The segment accounted for 30% of the company’s total sales in 2018.
  • Pre-Owned & Value Video Game Products, which refers to sales of used video gaming consoles, used video game titles, and used video game accessories. The segment accounted for 22% of the company’s total revenues in 2018.
  • Video Game Accessories, Digital & Others, which refers to sales of digital products, retail PC games, video game accessories, and collectibles, among others. The segment accounted for 27% of the company’s total revenues in 2018.

How have GameStop’s revenues changed over recent quarters?

  • Total Revenues for GameStop have largely trended lower over the last few quarters.
  • They declined from $3.50 billion in Q4 2017 to $3.06 billion in Q4 2018.
  • Note that Q4 is seasonally the strongest quarter for GameStop.
  • This decline was largely led by lower pre-owned video games sales, amid inventory issues for Nintendo Switch, among other factors.
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Which are the key revenue drivers to watch out for in GameStop’s Q1 results?

  • GameStop’s revenues will likely be $1.69 billion in Q1 2019. This represents a 12% decline over the prior year quarter, and 45% lower than what the company reported in the previous quarter.
  • New Video Game Hardware sales could see a sharp decline to $273 million in Q1, given the nearing end of the current console cycle for Xbox and Playstation.
  • Lower hardware sales could also impact the new video game software sales, which could fall to $383 million in Q1.
  • Pre-owned Video Games could also continue to see a decline in sales. However, the company should see some growth in Nintendo Switch sales, as its pre-owned inventory builds up.
  • Video game accessories sales growth in the recent past was being led by higher demand for audio-related and battle royale (gaming genre) related accessories. However, overall weakness in hardware and software sales could result in mid-single-digit decline to $187 million in Q1.

What will be the impact of the above on GameStop’s EPS?

  • GameStop’s adjusted loss per share will likely be $0.02 per share in Q1 2019, as compared to earnings of $0.38 in the prior year quarter.
  • Average consensus loss estimate ~ $0.03 per share.
  • This can largely be attributed to lower revenues, and a decline in margins, given the lower mix of pre-owned video games, which is a high-margin business. Increased expenses on promotions and marketing to drive sales could further impact the margins.


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